Viagogo As A New Intermediary

Eric Baker, the co-creator of online ticket reseller StubHub Inc., effectively declared war on himself when he launched an online ticket reselling business, viagogo. It is a British-based secondary ticket sales service that offers sporting and entertainment tickets. This was in August 2006, and Baker was at that time still a 10 percent owner of StubHub. He had co-founded the business in 2000 under the original name of Liquid Seats.

In 2000, Baker and his partner, Jeff Fluhr, had been first-year students at the Stanford Graduate School of Business. They had been observing the fact that there was hysteria on the ticket resale market. The market was incredibly fragmented and rampant with fraud and distorted pricing. Two buyers sitting side by side at the same event could discover that they had paid wildly different prices for the same product. At the time eBay was the biggest ticket reseller in the market, but Baker and Fluhr saw that they had an opportunity to create a system that would bring the buyer and the seller together in a far more efficient way. The pair entered the proposal in a new business plan competition. Fluhr was so convinced that the concept would work that he withdrew the proposal from the competition, dropped out of school, and launched the business. It was at a time when many online businesses were failing, and many believed that Fluhr would fail too. But Fluhr would become the chief executive officer of StubHub, a fast-growing company and a market leader in its field.

StubHub now has some 200 employees in San Francisco. The company has two call centers and seven satellite offices. Between 2004 and 2005, it tripled its sales volume to $200 million tickets sold. This generated $50 million in commission for the business, the bulk of which was profit.

Baker, meanwhile, had left StubHub in 2005 after falling out with Fluhr. He came up with the idea of viagogo around two months after he left. However, Baker still has a vested interest in the long-term success of both StubHub and his new business: "I have the opportunity to build two companies: one an American domestic, another International. I feel like I'm breaking new ground. I feel privileged to have that unique opportunity."

Meanwhile StubHub rejected the fact that Viagogo was any kind of challenge. Fluhr contended that others would want to copy their business model but they would never be able to replicate StubHub's success or operations and processes.

Baker was Intent on proving the fact that he was not simply copying StubHub but that he was trying to seize an opportunity that no one else had grasped.

Around the world the secondary ticket market is estimated to be worth $25 billion, viagogo is the only operator of its type in Europe, and the European market alone is worth between $7 billion and $10 billion. The other worldwide competitors are Time Warner's AOL and Ticketmaster, as well as eBay.

Baker began his market research on the British market in 2005, setting up in January 2006. He wanted to have a system that could cope with an ever-increasing demand for tickets. Typically viagogo charges 10 percent to the seller and 15 percent to the buyer, earning from both ends of the deal. Borrowing from StubHub, the system is guaranteed and secure. All of the deliveries are tracked and every user has to register his or her card details. If the seller cannot follow through on his or her deal, viagogo will source alternative tickets and the seller has to pay that cost. Baker's backers include Brent Hoberman and Danny Rimer, who are e-commerce specialists with lastminute.com.

Baker has organized a number of partnerships and deals with music promoters, as well as Premier League football clubs. In Britain, "antihooligan" laws actually prevent the reselling of football tickets. But viagogo has managed to get around these rules by organizing exclusive deals with clubs, meaning that viagogo is the only place to legally resell a ticket.

viagogo has quickly expanded to incorporate Germany, France, and Holland. It has also moved into the United States, taking on Baker's former company. It is estimated that viagogo is growing three times faster than StubHub, although StubHub sells around a billion dollars worth of tickets each year. In June 2008 viagogo won the Best New Business Award at the New Media Age Effectiveness Awards.

Eric Baker, speaking at the award ceremony said, "Viagogo is proud to receive this award. It recognizes the great strides that Viagogo has taken in the past eighteen months or so to revolutionize the ticketing Industry. We are really excited by the opportunities ahead and we look forward to taking the business onwards and upwards."

Across many different business and media interests, viagogo has received accolades for its services. The chief executive of Chelsea Football Club, Peter Kenyon, said, "This is a service for our fans that means more members will have more opportunities to buy tickets for matches than ever before. By providing a secure and transparent environment, season ticket holders will be able to legally sell tickets they are unable to use to other loyal Chelsea fans at a consistent price. This will help the fight against ticket touts."

The former vice president Europe of Amazon.com, Simon Murdoch, recognized the potential of the new business: "When Amazon launched in Europe, it was exciting creating a completely new market for selling books—the online market. We knew it could be big and the growth in online sales was indeed huge and has now surpassed most peoples' expectations. In the same way, Viagogo is creating a new market for secondary ticketing in Europe. With its guaranteed online exchange service I believe Viagogo can create a huge new market for tickets online."

StubHub itself was sold to eBay for $310 million in 2007, but Baker had not only retained 10 percent of the business but also had launched viagogo before StubHub was sold. A key issue that is yet to be fully settled is the criticism of ticket resale, as music agents believe that if a ticket is resold the artist should receive a share of the resale profit, viagogo has taken a different approach and is the premium and secondary ticketing partner for Madonna, viagogo pays a rights fee to pop-star Madonna and her concert promoter, Live Nation.

Viagogo works in a very similar way to StubHub. For a particular sports event fans will be aware that good tickets will be at a premium. Using StubHub, fans are likely to find a huge range of tickets to suit their pockets. Some of the prices are high, but others are far more reasonable and offer great value for events that are actually sold out. The user registers with StubHub, creates a user name and password and then simply orders the tickets by providing the credit card number. A confirmation email is then sent by StubHub and they also contact the seller to arrange the shipment. Importantly the buyer's card is not charged until the seller confirms to StubHub the time and method of delivery. At this point a second email is sent to the buyer giving the delivery details. In theory, the tickets should arrive as promised and when StubHub is assured that the tickets have arrived, the seller is paid. The transactions are therefore complete and in many cases the buyer has a huge range of ticket locations and price options to choose from to suit their specific requirements.

Back in Britain, in early 2008, the Culture, Media and Sport Select Committee concluded that many secondary ticket sales were less than reliable and that artists and sports bodies should share in profits from tickets. It was estimated that up to 40 percent of tickets were being sold on the Internet, and it was suggested that many secondary sellers were suspect at best. The chairman of the committee, John Whittingdale, said that it was not practical to ban ticket sales through a secondary market, but that ticket sellers should enter into a voluntary code or agreement; otherwise, the British government would legislate. The committee also concluded the following:

• The Internet makes it easier for individuals to profit from the resale of tickets, and this is unfair.

• Event organizers want to protect the industry and individuals should get refunds if they can return their tickets.

• Charity or free events should have a blanket ban on the resale of tickets.

• There should also be a ban on tickets given free to children or the disabled.

Michael Eavis, the organizer of the major annual music event Glastonbury, believed that ticket reselling should be effectively banned and that photographs should be placed on tickets so that they could not be resold.

Eric Baker responded by saying that it was like a tax on fans: "Artists have already been paid once, so it would be ridiculous for them to pay again. It is like reselling a car and expecting that Ford would be paid again."

Later Baker explained his point of view and the future direction of Viagogo:

"Two weeks ago, a committee of politicians from the British Parliament rejected calls from the concert promoter and sports industry lobbies for legislation to prevent the resale of live event tickets and instead recommended industry self-regulation. This is another landmark event in the rapid growth of an increasingly global industry. The trend that we have witnessed in the U.S. of state after state repealing its anti-scalping laws— most recently New York, Connecticut, Pennsylvania, Minnesota and Missouri—is now being seen across the globe. Outdated laws and opinions are being brushed aside to make way for market forces that create security and price transparency for fans. The invisible hand of Adam Smith, (a Brit no less), is guiding the ticketing industry towards a fairer, more open and fan-friendly future. The market potential for a global secondary ticketing exchange is huge. By our calculations, the European market opportunity alone is worth at least $9 billion, and globally it could exceed $25 billion by 2010. At the same time, the live entertainment industry is increasingly global—British bands continue to sell out concerts in the U.S., and the [National Football League] is playing regular season games in London." Indeed, it is not surprising that none other than Ticketmaster owner Barry Diller was recently quoted at a Citigroup media conference as saying that "the secondary ticketing market is arguably larger, in terms of dollar value, than the primary market. When I started viagogo, no one had created a global ticketing marketplace where an artist could partner with a single ticketing company to support their entire world tour. No one had created a marketplace where a consumer in Cleveland wanting to see a Manchester United game while on vacation in the U.K. could use the same site where he bought and sold his Cleveland Browns tickets. As markets open up across the globe—this is the real future of secondary ticketing. Over the next few years, we will see more countries modernize their laws and more sports franchises, recording artists and promoters demanding secondary ticket partners that can operate on a global scale. And secondary ticketing companies will be playing catch up to kickoff worldwide operations—being local is no longer an option."

Questions for Discussion

1. Conduct a brief analysis of the marketing environment and the forces shaping the development of viagogo.

2. Discuss viagogo's business model. What general benefits does it afford to buyers and sellers? Which benefits are most important in terms of creating value for buyers and sellers?

3. Discuss viagogo as a new intermediary. What effects has this new type of intermediary had on the ticket industry?

4. Apply the text's e-marketing domains framework to viagogo's business model. How has each domain played a role in the company's success?

5. What recommendations can you make for improving viagogo's future growth and success?

6. What are the legal or ethical issues, if any, for ticket-reselling Web sites?

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